How do executives affect their respective organizations? This question has been asked by many leading researchers in the field of leadership. Hambrick (2007) believes that leaders within the upper echelons behave on the basis of their personal views and understanding of “strategic situations” as well as their cultural values, personal experiences, and individual personalities. This has been the basis of upper echelon theory for many years, which was developed on the principle of bounded rationality (Cyert and March, 1963; March and Simon, 1958). However, regardless of these types of absolutely complex situations and “uncertain situations” (Mischel, 1977), leaders within the upper echelon of an organization have specific processes through which they can influence and change an institution.

Specifically, six influencing processes enable leaders to shape the strategic direction and performance of the organization. From direct decisions, leaders have the ability to shape the choices of their followers based solely on the control they have of the vision and mission of the organization (Nahavandi, 2006). These two variables (ie, vision and mission) thus affect the culture of the institution by clearly focusing on what the organization considers important and valuable (Nahavandi, 2006). In addition to the ability of leaders to influence an institution’s vision, mission, and strategy, senior leaders have a direct relationship with management, which plays a vital role in shaping (or reshaping) strategy. , dictating decision-making and establishing the climate or structure of the organization (Miller and Droge, 1993; Nahavandi, 2006). Leaders determine the organizational structure through the “direct decisions” of the variables that affect the structure or indirectly through the people they influence (Nahavandi, 2006). As a fictional example, Stanley Wang of Acme Toys joined the company just before the founder’s retirement. Founder James Green was forced to make a direct decision on whether or not to make Stanley the new CEO of the company. This decision would directly impact the organizational structure and influence the culture of the organization based on Stanley’s values ​​and personal experience.

Resource allocation is also another way that top-level leaders have a significant impact on an organization (Schein, 2004). These leaders are the main decision-makers about the allocation of resources (ie, human, technological, economic, etc.) both to individuals and to organizational units (Nahavandi, 2006). For example, a CEO may want to drive the sale of a number of new products, so the CEO may devote a large portion of the overall budget to the sales and marketing business units and draw funding from other business units that are of less concern. . In this example, resource allocation supports specific goals (ie, mission) in support of corporate strategy and creates a structure that enables expected results (Nahavandi, 2006; Miller, 1987).

In addition to direct decisions and resource allocation, reward systems (formal and informal) also have a significant impact on the culture of an institution or its employees (Schein, 2004; Nahavandi, 2006). Most of us are familiar with this type of behavior in the form of monetary incentives when we adhere to or conform to specific behavioral standards and/or achieve goals that reflect the organization’s mission. For example, an employee may receive a 10% bonus if they achieve a specific sales revenue or gross margin goal for a product or service.

However, reward systems are not only limited to monetary gain, but also through the selection and promotion of other leaders (Nahavandi, 2006). Those who adhere to and conform to organizational culture and structure, as well as meet individual goals and objectives, are much more likely to be promoted to higher leadership positions than those who do not (Nahavandi, 2006 ). This process can be true for almost any situation; those who naturally fit well into an organization’s mission and culture are more likely to be selected and rewarded in some way.

Both influencing processes can be seen across the board in our example scenarios. Again using Acme Toys as an example, Stanley Wang was significantly rewarded by his boss, James Green, by giving him all of the company’s high-profile projects. He then received every possible prize the company had to offer; thus justifying the future selection of him as CEO.

According to Nahavandi (2006), while rewarding employees encourages specific “behaviors and decisions” that align with the organization’s culture, leaders who act as role models and enact standards for decision making have a greater impact on the organization. For example, a senior leader may ask their top sales managers to develop a strategic sales plan that will achieve the organization’s goals and objectives. Although he does not dictate how they achieve those goals, he can be sure that they will achieve the desired result by establishing clear guidelines and decision-making standards.

Another way that leaders affect organizations is through their own behavior or role model (Nahavandi, 2006; Schein, 2004). A leader who is passionate about customer service will focus this passion in the information that is passed on to their employees. This can also be shown in terms of ethics and how a leader communicates with and expects employees to behave. This could be communicated through the vision and/or mission or through regular communication to employees. For example, as president of Uniform Data Link, Leslie Marks set out to become a role model for her employees. She moved her office from the third floor to the first floor to show that everyone was equal and that your title within the company doesn’t dictate how important you are. He regularly encouraged everyone to share ideas and worked directly with the engineers instead of working through the management levels. Leslie also reinforced her comfort values ​​in the workplace by coming to work in jeans almost every day.

Whether it’s direct decisions, rewards, role models, or resource allocation, leaders have many influencing processes that impact their organizations (Nahavandi, 2006). By using these processes, senior leaders essentially create a mirror image of their own personal style, values, preferences, and experience.

References

Cyert, R. M. & March, J. (1963). A theory of firm behavior. Upper Saddle River, NJ: Prentice Hall.

Hambrick, D.C. (2007). Upper echelon theory: an update. Management Review Academy, 32(2), 334-343.

March, J.G. and Simon, H.A. (1958). Organizations. New York: Willy.

Miller, D. (1987). The genesis of the configuration. Management Review Academy, 12, 686-701.

Miller, D. and Droge, C. (1986). Psychological and traditional determinants of structure. Administrative Science Quarterly, 31(4), 539-560.

Mischel, W. (1977). The interaction of the person and the situation. In D. Magnusson, & NS Endler (Eds.), Personality at the crossroads: Current issues in interactional psychology (pp. 217-247). Hillsdale, NJ: Lawrence Erlbaum Associates.

Nahavandi, A. (2006). The art and science of leadership. Upper Saddle River, NJ: Prentice Hall.

Schein, E. (2004). 2004. San Francisco: Jossey-Bass.

Schein, E. H. (1983). The role of the founder in creating organizational culture. Organizational Dynamics, 12(1), 13-28.

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